superpower???? oh please

[historian]

What an idiotic phrase. We have tons of bombs and all kinds of sophisticated weapons . so? The government is morally and financially bankrupt, our children leave school almost illiterate and ignorant of the world around them (both past and present)we slaughter each other on the streets and so on. Oh and we are so powerful we are stuck in two of the most primitive countries in the world - Afghanistan and Iraq.
The real superpower is china. They have thousands of years of experience and they understand the driving force behind American motives - money at all costs. They know that all the blustering of moral superiority collapses at the mention of restriction of trade and the average Chinese high school student can probably put an American university student to shame, especially when it comes to science.
But, and this is something the average cretin doesn't see, the Chinese can put us out of business in one fell swoop. They are major purchasers of American government bonds and since they are willing to accept bonds at relatively low rates, there is no need to increase the rates in order to attract more buyers. So in essence, the Chinese are funding low interest rates which in turn keeps credit card rates low, and the average citizen can continue with his frenzied buying of cheap Chinese merchandise. But suppose the Chinese suddenly decide to dump their bonds. Interest rates would go through the roof; the govt would begin to print more money to pay off the debt, inflation would become rampant,and a severs recession if not outright depression would be the inevitable result.
All of the sophisticated bombs or weapons could not stop this disaster if it were implemented.

[julianer]

1. It's not so easy for

China to just dump the bonds in one go. That would destroy America's ability to keep buying China's produce.

The other point is that the US is already 'printing money' in effect. Because the world trades oil in dollars, the US can easily increase its buying power by printing more. It's not inflationary because the dollar is a 'reserve' currency. If, however, oil was traded in Euros, then the magic trick would transfer to Europe and the US would be bankrupt. Iraq was planning to trade its oil in Euros after sanctions were lifted.

China and the US are caught in a game of economic chicken. The US must keep a huge inflow of foreign capital to support spending, as you say, but China itself would face an economic collapse if it cuts of the supply.

Can't last much longer, but the longer it goes on the worse it will be when it collapses.

One way out is for one or other of the parties to take all the grief. Thus America wants China to revalue the Renmimbi(?) and reduce the value of China's bond holding. Naturally China is not keen on this 'solution'. The other way out is for China to gradually transfer it's dollar holdings to Euros and Yen, but this could provoke a hostile response from the US.

And please note that this is a result of free market mania.

[historian]

2. good point

but china is already an economic power throughout the world with its enormous industrial output and cheap labor. Dont you think china could survive a setback more than we could? After all, what do we export the most? Agriculture and brazil is beginning to surpass us. What a mess we are in arent we?

[julianer]

6. China has become an economic power

by offering its cheap labour sources to international capital. But in the process it has completely bound its economic fortunes into world markets.

It is an arguable point whether they would survive an economic crisis better or worse because if Americans stop buying, Chinese stop working, which means that Americans stop buying, which means that Chinese stop working...

[Spazito]

4. China is working to accomplish exactly that, the gradual

reduction of their US investment, diversifying their export market to reduce dependence on US imports and purchasing/investing in energy corporations outside the US as well as bidding on US corporations like Unocal.

China is not the only country doing this, many others are reducing their dependence on the US economy. There have been new trade agreements with China/Canada; China/Russia; Venezuela/Russia/China.


Edited to add: Here is a snip from a May article:

Foreign investors sell U.S. assets
By TAVIA GRANT

Globe and Mail Update

Monday, May 16, 2005

International investments in U.S. securities dropped to $45.7-billion (U.S.) in March from $84.1-billion in February, the U.S. Department of Treasury said Monday, further evidence that foreign central banks may be diversifying their holdings away from U.S. assets.

The March inflows fell well short of the $70-billion economists polled by Bloomberg had expected. Moreover, it is below the $65-billion to $75-billion that is needed to cover the U.S.

http://www.theglobeandmail.com/servlet/Page/document/v4/sub/MarketingPage?user_URL=http://www.theglobeandmail.com%2Fservlet%2Fstory%2FRTGAM.20050516.wusdollar0516%2FEmailBNStory%2FBusiness&ord=1119620190063&brand=theglobeandmail&force_login=true

(To read the whole article, you have to subscribe because it is now in the archives.)

[julianer]

5. Yes, I agree China

has made widespread investment of its new found dollar wealth.

But at the same time there has been a steady ratcheting up of American criticism of China's monetary policies. American capitalists want the best of both worlds, it appears. And why not, they've had it up till now.

[C_U_L8R]

3. Without respect

we have no power.


(the reich-wing confuse fears with true moral leadership. Fear eventually fails)

[HeeBGBz]

7. SuperBully maybe

On the downhill slide